m-CBDC Project May Eventually Land on China’s BSN
The Multiple Central Bank Digital Currency Bridge (m-CBDC) project which runs on a distributed ledger technology (DLT) network could eventually run on China’s new Blockchain Service Network (BSN).
This is according to Fintech and China expert Richard Turrin, author of ‘Innovation Lab Excellence’ and ‘Cashless’, a book on China’s digital currency revolution, who sees the m-CBDC as “the final piece of the China CBDC puzzle.”
Initiated by the Hong Kong Monetary Agency and the Bank of Thailand in 2019, the m-CBDC project seeks to explore the capabilities of DLT, develop a proof-of-concept prototype and facilitate real-time cross-border foreign exchange payment-versus-payment transactions across many jurisdictions on a 24/7 basis.
Its bridge component is significant as it connects China’s CBDC, for example, with trial CBDCs from the United Arab Emirates and Thailand – both Belt and Road Initiative member countries and already trade in RMB – which all use custom technologies. Turrin notes that the m-CBDC project “brings us one-step closer to free and immediate CBDC transfer” based on its interoperability feature.
The BSN, as a cross-framework global infrastructure network that seeks to become the blockchain Internet, opens the way for public blockchains to access China and creates an environment to encourage all parties to develop decentralized applications for less. Running the m-CBDC on BSN will widen the reach of the cross-border payments initiative albeit the platform contending with trust issues surrounding its centralized control.
Turrin maintains that the m-CBDC could likely be open to all CBDCs, and there’ll possibly be a US bridge vs. China bridge as the project signals the end of bank cash transfer revenue, continues the internationalization of the yuan (no SWIFT and U.S. dollar in use) is somewhat setting up Hong Kong as the new international transfer center for China’s DCEP.
“The big deal is that this transaction has the potential, someday, to make the currency transfer between one country and the other free and immediate, reducing the cost of business for all of these countries,” he said in an interview with CGTN. “So it’s a great project, not live yet, remember this is just a test, a trial, but if it works, if all of these countries learn how to make digital currencies flow from one country to the other, it’s a big deal.”
While adding that the project will help simplify doing business between all the countries involved, he touches on what the m-CBDC move means to China.
“China is really somewhere between five and ten years ahead of the rest of the world in this,” he says, stressing the importance of understanding that building a CBDC is more complicated than a cryptocurrency like Bitcoin. “The lead is important for China because they are the first major economy to be testing and so far among the development of a digital currency and what this really means is that China will be able to start using the digital RMB for global trade. That is a very important consideration because it would assist China internationalizing the RMB – basically pushing the RMB out to markets where it trades and instead of using dollars, traders will now be able to use the RMB conveniently, inexpensively and/or digitally.”